Leases

6 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Leases

The Company determines whether an arrangement contains a lease at the inception of the contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Energizer's portfolio of leases contains certain real estate, equipment, vehicles and office equipment leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Additionally, the Company's leases do not contain material residual value guarantees or material restrictive covenants.

Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company does not account for lease components separately from non-lease components. The discount rate used to calculate present value for both operating and financing leases is Energizer's incremental borrowing rate based on information available at the commencement date, or if available, the rate implicit in the lease. The incremental borrowing rate used is determined based on fully secured borrowings at the time of adoption, or going forward, at the date of lease commencement. Many of these agreements contain options to renew or terminate the lease. For calculating lease liabilities, the Company includes these options within the lease term when it is reasonably certain that the Company will execute such options. Some

of the leases include variable payments, which primarily are tied to asset usage or sales rather than an index or rate. As such, these variable payments are not included in the calculation of the Company's lease assets and liabilities.

As of March 31, 2020 the amounts for leases included in our Consolidated (Condensed) Balance Sheet include:

Balance Sheet Location	March 31, 2020
Operating Leases:
Operating lease asset	$	91.9
Operating lease liabilities - current	14.0
Operating lease liabilities	80.0
Total Operating Lease Liabilities	$	94.0
Weighted-average remaining lease term (in years)	16.3
Weighted-average discount rate	4.4		%
Finance Leases:
Property, plant and equipment, net	$	45.7
Current portion of capital leases	1.7
Long-term debt	44.7
Total Finance Lease Liabilities	$	46.4
Weighted Average remaining lease term (in years)	20.7
Weighted-average discount rate	6.8		%

During the first quarter of fiscal 2020, Energizer entered into an operating lease that will result in significant rights and obligations; however, the lease will not commence until the third fiscal quarter of 2020. The commencement date was determined in accordance with ASC 842 based on when the lessor makes the underlying asset available for use. The lease term is for 16 years and the Company expects this lease to result in a material right of use operating lease asset and operating liabilities upon commencement.

The following table presents the components of lease expense:

	For the Quarter ended,		For the Six Months ended,
	March 31, 2020		March 31, 2020
Operating lease cost	$	5.0	$	9.5
Finance lease cost:
Amortization of assets	0.8		1.6
Interest on lease liabilities	0.7		1.5
Variable lease costs	0.8		1.1
Total lease costs	$	7.3	$	13.7

Supplemental cash and non-cash information related to leases:

	For the Six Months ended,
	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.7
Operating cash flows from finance leases	1.5
Financing cash flows from finance leases	0.7
Non-cash increase in lease assets and lease liabilities:
Operating leases (1) (2)	$	51.0

(1) During the first quarter of fiscal 2020, Energizer entered into a material embedded lease agreement which resulted in operating lease asset and lease liabilities of approximately $34. The embedded operating lease commenced on November 1, 2019. During the second quarter of fiscal 2020, Energizer renewed the North America headquarters lease, which resulted in a material lease modification and additional operating lease assets and lease liabilities of approximately $17.

(2) The non-cash increase in operating lease assets and liabilities above does not include the lease assets and lease liabilities recorded due to the ASC 842 implementation on October 1, 2019.

Minimum lease payments under operating and finance leases with non-cancellable terms in excess of one year as of March 31, 2020 are as follows:

	Operating Leases			Finance Leases
2020	$	9.4		$	2.3
2021	15.8			4.6
2022	14.1			4.7
2023	13.1			4.6
2024	12.9			4.4
Thereafter	72.9			70.8
Total lease payments	138.2			91.4
Less: Imputed interest	(44.2		)	(45.0		)
Present value of lease liabilities	$	94.0		$	46.4

As previously disclosed in our 2019 Annual Report on Form 10-K and under ASC 840, the minimum rental commitments under non-cancellable operating leases directly held by Energizer and were in effect as of September 30, 2019, were $16.8 in fiscal 2020, $10.3 in fiscal 2021, $6.6 in fiscal 2022, $5.8 in fiscal 2023, $5.4 in fiscal 2024 and $38.9 thereafter.

Leases

Leases

The Company determines whether an arrangement contains a lease at the inception of the contract by determining if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Energizer's portfolio of leases contains certain real estate, equipment, vehicles and office equipment leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Additionally, the Company's leases do not contain material residual value guarantees or material restrictive covenants.

Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company does not account for lease components separately from non-lease components. The discount rate used to calculate present value for both operating and financing leases is Energizer's incremental borrowing rate based on information available at the commencement date, or if available, the rate implicit in the lease. The incremental borrowing rate used is determined based on fully secured borrowings at the time of adoption, or going forward, at the date of lease commencement. Many of these agreements contain options to renew or terminate the lease. For calculating lease liabilities, the Company includes these options within the lease term when it is reasonably certain that the Company will execute such options. Some

of the leases include variable payments, which primarily are tied to asset usage or sales rather than an index or rate. As such, these variable payments are not included in the calculation of the Company's lease assets and liabilities.

As of March 31, 2020 the amounts for leases included in our Consolidated (Condensed) Balance Sheet include:

Balance Sheet Location	March 31, 2020
Operating Leases:
Operating lease asset	$	91.9
Operating lease liabilities - current	14.0
Operating lease liabilities	80.0
Total Operating Lease Liabilities	$	94.0
Weighted-average remaining lease term (in years)	16.3
Weighted-average discount rate	4.4		%
Finance Leases:
Property, plant and equipment, net	$	45.7
Current portion of capital leases	1.7
Long-term debt	44.7
Total Finance Lease Liabilities	$	46.4
Weighted Average remaining lease term (in years)	20.7
Weighted-average discount rate	6.8		%

During the first quarter of fiscal 2020, Energizer entered into an operating lease that will result in significant rights and obligations; however, the lease will not commence until the third fiscal quarter of 2020. The commencement date was determined in accordance with ASC 842 based on when the lessor makes the underlying asset available for use. The lease term is for 16 years and the Company expects this lease to result in a material right of use operating lease asset and operating liabilities upon commencement.

The following table presents the components of lease expense:

	For the Quarter ended,		For the Six Months ended,
	March 31, 2020		March 31, 2020
Operating lease cost	$	5.0	$	9.5
Finance lease cost:
Amortization of assets	0.8		1.6
Interest on lease liabilities	0.7		1.5
Variable lease costs	0.8		1.1
Total lease costs	$	7.3	$	13.7

Supplemental cash and non-cash information related to leases:

	For the Six Months ended,
	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	9.7
Operating cash flows from finance leases	1.5
Financing cash flows from finance leases	0.7
Non-cash increase in lease assets and lease liabilities:
Operating leases (1) (2)	$	51.0

(1) During the first quarter of fiscal 2020, Energizer entered into a material embedded lease agreement which resulted in operating lease asset and lease liabilities of approximately $34. The embedded operating lease commenced on November 1, 2019. During the second quarter of fiscal 2020, Energizer renewed the North America headquarters lease, which resulted in a material lease modification and additional operating lease assets and lease liabilities of approximately $17.

(2) The non-cash increase in operating lease assets and liabilities above does not include the lease assets and lease liabilities recorded due to the ASC 842 implementation on October 1, 2019.

Minimum lease payments under operating and finance leases with non-cancellable terms in excess of one year as of March 31, 2020 are as follows:

	Operating Leases			Finance Leases
2020	$	9.4		$	2.3
2021	15.8			4.6
2022	14.1			4.7
2023	13.1			4.6
2024	12.9			4.4
Thereafter	72.9			70.8
Total lease payments	138.2			91.4
Less: Imputed interest	(44.2		)	(45.0		)
Present value of lease liabilities	$	94.0		$	46.4

As previously disclosed in our 2019 Annual Report on Form 10-K and under ASC 840, the minimum rental commitments under non-cancellable operating leases directly held by Energizer and were in effect as of September 30, 2019, were $16.8 in fiscal 2020, $10.3 in fiscal 2021, $6.6 in fiscal 2022, $5.8 in fiscal 2023, $5.4 in fiscal 2024 and $38.9 thereafter.